What is the current state of access to Agri-Finance in Kenya
Compared to other parts of East Africa, Kenya has a well-developed financial market. Many services are widely available, ranging from credit and loans, savings and payments from commercial banks and micro- finance institutes (MFIs), savings and credit cooperative societies (SACCOs), and mobile-based transfer services, like M-PESA. The number of Kenyans using these services has almost tripled over the past decade. Fintech has been a major driver of this development, having made it possible to link bank accounts to mobile money. However, this boom in financial services provision is slow paced in the agriculture sector, at least based on current savings and lending patterns.
Agribusiness is not the most attractive venture for financial services. The appropriateness of the financial services for the micro, small and medium sized enterprises (MSMEs) in agriculture remains questionable. MSMEs supply 80% of the food consumed by Kenyans, however majority operate in the informal sector and are particularly vulnerable to shocks. Kenyan farmers and agribusinesses have of recent been affected by erratic weather, severe floods, fall armyworms and desert locust invasions, and had to cope with the mobility restrictions and supply chain disruptions that accompanied the necessary public health measures to curb the spread of COVID-19. Yet transforming the Kenya’s food systems desperately needs investments and innovations to which contribute towards sustainable access to healthy food for all.
Is there hope?
Going digital is offering a quantum leap in the provision of more traditional financial services to Kenyans. Can the same hold true for customising and de-risking financial products for farmers and agribusinesses? New, innovative and digital products targeting farmers and agribusinesses are surfacing: like weather station, satellite-based and hybrid weather insurances; area-yield indices insurance; and dairy livestock and multiple peril crop insurances. For instance, The Kenya National Agricultural Insurance Program, Global Index Insurance Facility, Kenya Livestock Insurance Programme (KLIP) and ACRE Africa offer valuable opportunities to learn, collaborate, replicate and scale solutions across the food system. Going digital may offer opportunities for farmers to connect with quality input suppliers, diversify their markets, access to information, all important aspects in sustaining their financial resilience. It can also support mitigates risks and breaks the vicious cycle of debt, challenges presented by supply chain disruption, and costly social demands.
What agribusiness and regenerative agriculture need are systems leaders capable of identifying financing opportunities in the public and private sectors, and linking the two. You would do well to build relationships with financial institutes and to change opinions about agri-finance. By investigating new digital products that are accessible, inexpensive for MSMEs and shifting the balance from risk to reward, you may emerge as one of the architects of Kenya’s agri-finance future. Given the emphasis of your peers in the Kenyan cohort on inclusive aquaculture and micro and small enterprise in horticulture, there is huge scope to synergise your efforts. You will be joining a group of changemakers that graduated in the 2021 African Food Fellowship cohort. These fellows are active in the Kenyan Agri finance space and they are committed to develop inclusive solutions for MSMEs. Here are some of their reflections on their Fellowship journey:
"I am now able to view my work through a wider system perspective. I am focusing on improving digitalization in the agriculture sector and hope to focus on the policy aspects and develop scenarios using different data. I have also engaged with Smart Market for Fish in Kenya which has enabled me review and look at the wider system, the partners involved, the changes required and how they can be leveraged."
"As a technical person, its easy to get lost in the digital jargon. This fellowship has helped me under the food system, understand the position of work in the system which goes beyond the geospatial technologies. I want to support mechanisation, precision agriculture, data driven decision making to reduce labour intensity and monotony in the agriculture value chain. The fellowship has taken me out of my cocoon to see the dynamics across the value chain and provided avenues to understand the complexity and uncertainties in our food system" Agri-Finance Fellows, Kenyan Cohort 2021.
Sources of information
- FSD Kenya. 2017. Creating value through financial inclusion: FSD 2016 to 2021 strategy brief. Nairobi, Kenya: FSD Kenya.
- Rampa, F., & Dekeyser, K. (2020). AgrInvest-Food Systems Project–Political economy analysis of the Kenyan food systems: Key political economy factors and promising value chains to improve food system sustainability. Food & Agriculture Org.
- Wattel, C.J. and Savelkouls, C., 2018. Access to finance for small and medium-sized family farms in Kenya: How can it be improved? (No. 4).
- African Business. (2020, March 9). How is repeal of interest rate cap affecting Kenya’s economy?
- Ingrid Coninx, Researcher – Regional Development and Spatial Use
- Kate Hyder, Director of Innovation, Root Capital